San Miguel Corporation vs. Puzon Jr.

A postdated check issued merely as security or to cover a credit obligation, without intent to give effect to it as payment, does not transfer title or ownership to the payee; the drawer’s retrieval of the check cannot constitute theft because the property does not belong to another.

Respondent Bartolome V. Puzon, Jr., owner of Bartenmyk Enterprises, was a dealer of beer products of petitioner San Miguel Corporation for Paranaque City. Puzon purchased SMC products on credit, and SMC required him to issue postdated checks equivalent to the value of the products purchased on credit before the products were released to him. The checks were returned to Puzon when the transactions covered by them were paid or settled in full.

Respondent Bartolome V. Puzon, Jr., owner of Bartenmyk Enterprises, was a dealer of beer products of petitioner San Miguel Corporation for Paranaque City. Puzon purchased SMC products on credit. To ensure payment and as a business practice, SMC required him to issue postdated checks equivalent to the value of the products purchased on credit before the products were released to him. The checks were returned to Puzon when the transactions covered by them were paid or settled in full.

On December 31, 2000, Puzon purchased products on credit amounting to P11,820,327. For this transaction, he issued and gave SMC Bank of the Philippine Islands Check Nos. 27904, for P309,500.00, and 27903, for P11,510,827.00, to cover the transaction.

On January 23, 2001, Puzon, together with his accountant, visited the SMC Sales Office in Paranaque City to reconcile his account with SMC. During that visit, Puzon allegedly requested to see BPI Check No. 17657. According to SMC, when he got hold of BPI Check No. 27903, which was attached to a bond paper together with BPI Check No. 17657, he immediately left the office with his accountant, bringing the checks with them. On March 6, 2001, SMC sent Puzon a letter demanding the return of the checks. Puzon ignored the demand, and SMC filed a complaint against him for theft with the City Prosecutor’s Office of Paranaque City.

The investigating prosecutor found that the relationship between SMC and Puzon appeared to be one of credit or creditor-debtor relationship, and that the problem lay in the reconciliation of accounts and the non-payment of beer empties, which could not give rise to a criminal prosecution for theft. The Court of Appeals found that the postdated checks were issued by Puzon merely as security for the payment of his purchases and were not intended to be encashed.

• Identity and Taking: SMC contended that Puzon was positively identified by its employees as having taken the subject postdated checks.
• Ownership and Payment: SMC contended that ownership of the checks was transferred to it because the checks were issued not merely as security but in payment of Puzon’s purchases.
• Probable Cause: SMC maintained that it had established more than sufficient probable cause to justify Puzon’s indictment for theft.

• Questions of Fact: Puzon contended that SMC raised questions of fact beyond the province of an appeal on certiorari.
• No Probable Cause and Retained Ownership: Puzon insisted that there was no probable cause to charge him with theft because the subject checks were issued only as security and he therefore retained ownership of them.

• Theft of Check: Whether Puzon stole from SMC on January 23, 2001, among others, BPI Check No. 27903 dated March 30, 2001, in the amount of P11,510,827.00.
• Payment or Security: Whether the postdated checks issued by Puzon, particularly BPI Check No. 27903 dated March 30, 2001, in the amount of P11,510,827.00, were issued in payment of his beer purchases or were used merely as security to ensure payment of Puzon’s obligation.
• Contract of Pledge: Whether SMC’s practice of returning the postdated checks issued in payment of beer products purchased on credit, should the transactions covered by these checks be settled on their maturity dates, could be likened to a contract of pledge.
• Probable Cause for Theft: Whether SMC had established probable cause to justify the indictment of Puzon for the crime of theft pursuant to Article 308 of the Revised Penal Code.

• Theft of Check: No probable cause for theft was shown. The question whether Puzon actually stole the check called for a determination of guilt of a felony and could not be resolved on mere allegations and affidavits in this petition for review on certiorari rooted in the prosecutor’s finding of no probable cause.
• Payment or Security: The checks were issued merely as security or to cover the credit transaction, not as payment. Under Section 12 of the Negotiable Instruments Law, delivery transfers title only when made to give effect to the instrument; because there was no intent to pay, ownership remained with Puzon.
• Contract of Pledge: Not reached. Resolution of whether SMC’s practice could be likened to a contract of pledge would entail constitutional matters and was unnecessary to the main inquiry into grave abuse of discretion and probable cause for theft.
• Probable Cause for Theft: No. Probable cause for theft was not established because the check did not belong to another; the DOJ did not gravely abuse its discretion in dismissing the complaint, and the CA correctly affirmed.

• Theft of Check: The Court preliminarily held that SMC raised questions of fact. The first issue—whether Puzon stole the subject check—called for a determination of whether he was guilty of a felony, which first required that the facts be duly established in the proper forum and in accord with proper procedure. It could not be resolved based on mere allegations of facts and affidavits. The same was true of the second issue. These issues could not be properly resolved in a petition for review on certiorari rooted merely on the prosecutor’s resolution finding no probable cause for the filing of an information for theft. The third issue would entail constitutional matters and was unnecessary because the main matter concerned grave abuse of discretion and the existence of probable cause for theft.

• Payment or Security: The Court considered whether ownership of the subject check was transferred to SMC, because the second element of theft is that the thing taken belongs to another. Under Section 12 of the Negotiable Instruments Law, a postdated instrument is not invalid and the person to whom it is delivered acquires title as of the date of delivery, but delivery means that the party delivering did so for the purpose of giving effect to the instrument. If the check was given in payment, title transferred upon delivery; if it was not given as payment, there being no intent to give effect to it, ownership was not transferred. SMC’s evidence failed to establish payment. No provisional or official receipt was issued for the amount of the check; what was issued was a receipt for the document, a “POSTDATED CHECK SLIP.” SMC’s demand letter used “covered” and “cover,” not “payment.” The affidavit of Gregorio L. Joven III stating that the check was given in payment was contradicted by his statements that beer purchases on credit were “covered” by postdated checks, that the transaction covered by the check had not yet been paid for, and that partial payment was expected through return of beer empties rather than deposit or encashment of the check. Puzon’s counter-affidavit stated that as the liquid beer contents were paid for, SMC returned the corresponding postdated checks or requested replacement for the unpaid balance. Both parties therefore did not intend the check to pay for the beer products. The check was accepted not as payment but under SMC’s long-standing policy requiring dealers to issue postdated checks to cover receivables; Puzon was to pay by other means. Title to the check did not transfer to SMC and remained with Puzon.

• Contract of Pledge: The Court declined to resolve whether SMC’s practice of returning postdated checks upon settlement could be likened to a contract of pledge. It held that this issue would entail venturing into constitutional matters for a complete resolution, and that route was unnecessary because the main matter for resolution concerned grave abuse of discretion and the existence of probable cause for theft, which was more properly resolved through another, clearer route.

• Probable Cause for Theft: Probable cause was defined as such facts and circumstances as would engender a well-founded belief that a crime had been committed and that the respondent was probably guilty and should be held for trial. Its determination lies within the discretion of prosecuting officers after preliminary investigation; it is an executive function pertaining first to the public prosecutor and ultimately to the Secretary of Justice. Unless made with grave abuse of discretion, the Secretary of Justice’s findings are not subject to review, and courts refrain from interfering in preliminary investigations. The Court was not sufficiently convinced to deviate from the general rule of non-interference. Article 308 of the Revised Penal Code defines theft as taking personal property of another without consent, with intent to gain, and without violence, intimidation, or force upon things. Its essential elements include that the property taken belongs to another. Because ownership of the subject check did not transfer to SMC and remained with Puzon, the second element was not established. SMC failed to show that Puzon took a check that belonged to another. The prosecutor and the DOJ were therefore correct in finding no probable cause for theft, and the CA did not err in finding no grave abuse of discretion committed by the DOJ in sustaining the dismissal.

• Probable Cause — Probable cause consists of such facts and circumstances as will engender a well-founded belief that a crime has been committed and that the respondent is probably guilty thereof and should be held for trial. Its determination lies within the discretion of prosecuting officers after preliminary investigation and is an executive function pertaining first to the public prosecutor and ultimately to the Secretary of Justice. Courts do not reverse the Secretary of Justice’s findings except in clear cases of grave abuse of discretion. Applied here, no grave abuse was shown in the DOJ’s finding of no probable cause for theft.

• Theft under Article 308 of the Revised Penal Code — Theft is committed by any person who, with intent to gain but without violence against, or intimidation of persons nor force upon things, shall take personal property of another without the latter’s consent. Its essential elements are: (1) taking of personal property; (2) the property belongs to another; (3) the taking is done with intent to gain; (4) the taking is done without the consent of the owner; and (5) the taking is accomplished without violence or intimidation against persons or force upon things. The Court held that the second element was absent because the check remained Puzon’s property.

• Delivery and Transfer of Title in Negotiable Instruments — Under Section 12 of the Negotiable Instruments Law, an instrument is not invalid merely because it is antedated or postdated, provided this is not done for an illegal or fraudulent purpose, and the person to whom an instrument so dated is delivered acquires title as of the date of delivery. Delivery, however, means that the party delivering did so for the purpose of giving effect to the instrument. If the check was given in payment, title transferred upon delivery; if it was not given as payment, there being no intent to give effect to it, ownership was not transferred. The Court applied this rule to hold that SMC did not acquire ownership of the check.

• Postdated Checks as Security or Cover — A postdated check issued merely to cover a credit obligation, and not as payment, does not transfer ownership to the payee. The drawer’s retrieval of such a check cannot constitute theft because the property does not belong to another. The Court found that the check was accepted under SMC’s policy requiring dealers to issue postdated checks to cover receivables, and that Puzon was to pay by other means.

• Grave Abuse of Discretion in Preliminary Investigation — Findings of the Secretary of Justice on probable cause are not subject to review unless made with grave abuse of discretion. Courts refrain from interfering in the conduct of preliminary investigations and leave the Department of Justice ample latitude of discretion in determining sufficient evidence to establish probable cause. The Court found no grave abuse of discretion in the DOJ’s dismissal of the theft complaint.

• “Probable cause is defined as such facts and circumstances that will engender a well-founded belief that a crime has been committed and that the respondent is probably guilty thereof and should be held for trial.” — This is the Court’s canonical definition of probable cause, which anchors its deferential review of the DOJ’s probable-cause determination.
• “If the subject check was given by Puzon to SMC in payment of the obligation, the purpose of giving effect to the instrument is evident thus title to or ownership of the check was transferred upon delivery. However, if the check was not given as payment, there being no intent to give effect to the instrument, then ownership of the check was not transferred to SMC.” — This passage states the ratio decidendi on when delivery of a postdated check transfers ownership under the Negotiable Instruments Law.
• “This being so, title to the check did not transfer to SMC; it remained with Puzon. The second element of the felony of theft was therefore not established.” — This is the core holding that negates probable cause for theft because the check did not belong to another.
• “Clearly the term “cover” was not meant to be used interchangeably with “payment.”” — This excerpt captures the Court’s evidentiary reasoning that SMC’s own documents and witness statements showed the check was accepted as security or cover, not as payment.

• Sanrio Company Limited vs. Lim, G.R. No. 168662, February 19, 2008, 546 SCRA 303, 312-313 — Cited for the definition of probable cause as such facts and circumstances that engender a well-founded belief that a crime has been committed and that the respondent is probably guilty and should be held for trial.
• Reyes vs. Pearlbank Securities, Inc., G.R. No. 171435, July 30, 2008, 560 SCRA 518, 535-536 — Cited for the rule that the determination of probable cause lies within the discretion of prosecuting officers after preliminary investigation, is an executive function, and is not subject to review absent grave abuse of discretion.
• Aoas vs. People, G.R. No. 155339, March 3, 2008, 547 SCRA 311, 317-318; People vs. Puig, G.R. Nos. 173654-765, August 28, 2008, 563 SCRA 564, 570; Cruz vs. People, G.R. No. 176504, September 3, 2008, 564 SCRA 99, 110 — Cited for the essential elements of the crime of theft under Article 308 of the Revised Penal Code.

• Article 308, Revised Penal Code — Defines theft as committed by any person who, with intent to gain but without violence against, or intimidation of persons nor force upon things, shall take personal property of another without the latter’s consent. The Court used it to enumerate the elements of theft and held that the second element—that the property belongs to another—was absent because the check remained Puzon’s.
• Section 12, Negotiable Instruments Law — Provides that an instrument is not invalid merely because it is antedated or postdated, provided this is not done for an illegal or fraudulent purpose, and that the person to whom an instrument so dated is delivered acquires title as of the date of delivery. The Court applied it to hold that delivery transfers title only if made to give effect to the instrument; since the check was not delivered as payment, title did not transfer.
• Section 16, Negotiable Instruments Law — Cited in the decision’s footnote for the rule that delivery, as used in the provision, means that the party delivering did so for the purpose of giving effect to the instrument. The Court used this to determine that there was no effective delivery transferring ownership.

Corona, C.J. (Chairperson), Carpio Morales, Velasco, Jr., and Perez, JJ., concurred. The footnote states that Justice Carpio Morales sat in lieu of Associate Justice Teresita J. Leonardo-De Castro per Special Order No. 884 dated September 1, 2010.